As if dealers weren’t already doing a lot more work with a lot less manpower, they have an extra challenge: calming builders surprised by hikes in building material prices, especially lumber.
“The landscape has changed rapidly during the past few months,” industry consultant Dena Cordova notes. “During the past few years, builders have gotten used to the idea of rock-bottom pricing and prompt shipments.” Now, she says, they’re suffering from sticker shock.
A recent survey by the National Association of Home Builders (NAHB) found that more than three-quarters of builders polled expect higher material prices in 2013, up from the 46% who said so a year earlier. Rising prices for materials outranked the cost and availability of labor and land—builders’ second and third concern—for the third consecutive year.
Those worries start with framing lumber, which in 2011 accounted for 13.5% of the cost of the average home built that year, more than any other product used, the NAHB says. Framing lumber’s average price has more than doubled since February 2009 to $409 per thousand board feet in February 2013, Random Lengths reports.
This comes as dealers contend with a shortage of their own. It’s no secret building material dealers let much of their mid-level talent go during the downturn. And, says Bill Tucker, a consultant at executive recruiting firm Schaffer Associates in Charlotte, N.C., it’s highly unlikely they’ll return.
“They’re out of the industry,” he says. “It’s not a big market out there [in which] to find good candidates.” Put the two sets of woes together, and you could find dealers’ less experienced new hires having to guide builder customers upstream through the commodity buying process, Cordova says. That means managers will need to teach their teams how to sell at a time when commodity prices are subject to volatile swings.
To cope, Cordova says, reps should focus on helping builders better understand how commodity pricing works. That should help keep competitors seeking market share from swooping in and stealing customers. In addition, try setting up contracts that allow a larger builder or a team of smaller customers to purchase commodity building materials such as lumber or OSB at a set price, the consultant suggests.
“Arm your sales team with market information and help them to show your clients your company is knowledgeable and has the resources to proactively help them,” she says.